Opinion: State unemployment insurance system ripe for reform
By RICHARD C. LORD
Associated Industries of Massachusetts (AIM) has urged elected officials many times to act to improve the state's economic and investment climate. Repeatedly, AIM suggests that any cost of doing business in Massa-chusetts higher than similar costs in other states, ought to be examined to determine the best way to address our anti-competitiveness.
Unemployment insurance (UI) is an area that cries out to be addressed. UI, employer paid taxes, driven by our state's high wages, lenient qualification requirements and overly generous benefit structure, are among the highest in the country. In a recent white paper entitled, Measuring Up, the Cost of Doing Business in Massachusetts, the Pioneer Institute details the impact of the state's business costs on competitiveness and on profit. For anyone interested in increasing private sector, for-profit job creation in the commonwealth, this report is a "must read." One area singled out for particular attention is the Massachusetts UI system and the non-competitive costs imposed as a consequence.
• H.1799, a bill before the state legislature proposed by AIM, seeks to introduce approximately $366 million in one-time and recurring cost saving into the system by proposing the following reforms:
• Increasing the number of weeks of
work for eligibility to collect UI benefits from 15 weeks to 20, and requiring wages to be paid in at least two quarters, bringing Massachusetts into line with the majority of other states and saving an estimated $30 million annually.
• Reducing the maximum duration of benefit weeks from 30 to 26 when the state's economy is performing well by adjusting the statutory trigger mechanism from 5.1 percent unemployment in each of the 10 local labor markets in the state to a straight 5.1 percent unemployment rate statewide over the preceding six months – producing savings in the UI Trust Fund of between $50 and $90 million per year. This provision would bring Massachusetts' benefits into line with all other states.
• Eliminating the Medical Security Trust Fund and the accompanying surcharge of $16.80 per employee, created by Chapter 23 of the Acts of 1988, imposed on companies with more than 5 employees. With the state's new Health Insurance law, this program is unnecessary. The estimated annual savings from this measure would be $48 million.
• Returning the proceeds of the Medical Security Trust Fund on a pro-rata basis to the state's employers, an estimated one-time savings of $64 million.
• Setting the contribution rate for 2008 at Schedule D, the same rate as has been in place since the 2004 reforms, and saves the employers of the commonwealth from an unnecessary 5.7 percent or an $88 million cost increase at a time when the trust fund balance is close to triggering Schedule D without legislative intervention (estimated one-time savings: $154 million).
These proposals represent a significant savings for employers and an opportunity to reform the state's UI system without jeopardizing payment of benefits or the long-term solvency of the Trust Fund. Such actions will ensure that funds will be available in the future to workers who through, no fault of their own, are unemployed.
Richard C. Lord is president & CEO
of Associated Industries of Massachusetts, a statewide employer association dedicated to make Massachusetts a good place to live and work.
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